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Mkt regains 500 points on short- covering.

SHORT- covering in the derivatives segment and some amount of buying in the cash segment helped the main indices wipe out Tuesday's losses and turn positive. The BSE Sensex registered a sharp gain of over 500 points after a gruelling six- day ordeal of suffering sustained losses.

It is said to be a dead cat bounce, or a technical bounce back that follows a steep fall. Though the Sensex opened just over 80 points above the previous close, which was 1,405 points lower than the level it saw about seven sessions back, it gained consistently and closed with a gain of 507 points at 15,912.13. On the same lines, the National Stock Exchange index Nifty gained 146.9 points to close at 4,710.80.

Positive global cues also added the much needed zing to the Indian market, after Tuesday's bad news of interest rate hike in Australia and continued sub- prime pain that some UK- based banks are still suffering. Finance minister Pranab Mukherjee's comments that the stimulus will not be unwound soon, in the wake of lower crop yields in the kharif season, also jelled well with the sentiment. The market was worried about the possible withdrawal of the government stimulus, which was introduced to give a boost to the sagging economy, and the approaching high interest rate cycle, hinted at by the Reserve Bank of India ( RBI).

There was a buzz that an ' institutional operator' might have been involved in Reliance Industries Ltd ( RIL) stock, since the stock was majorly involved in the market fall on Tuesday and its bounce back on Wednesday. RIL, which had shed 5.73 per cent on Tuesday, bounced back to gain 5.49 per cent on Wednesday.

However, the bears covering their short positions after the market started rising, seem to be a more valid reason.

Many punters were holding huge short positions till Tuesday. They might have started squaring up their positions, after the market saw more than an expected fall in the main indices.

After the steep gyrations seen over the last two sessions, the market may not have a smooth ride ahead, whichever way the major indices move -- up or down. Scepticism will rule the market for a while, before sanity returns.

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Publication:Mail Today (New Delhi, India)
Date:Nov 5, 2009
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